Jakarta Globe, Ian Sayson, Apr 01, 2015
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| Filipino residents paint homes as an AirAsia plane flies over at a housing project in Paranaque city, south of Manila, Philippines, on March 25, 2015. Growth in the Philippine economy is set to pick up in 2015 as government expenditure expands and both private consumption and investment remain strong, says a new Asian Development Bank report. (EPA Photo/Francis R. Malasig) |
Billionaire
Henry Sy, the richest person in the Philippines, will start to develop
apartments, offices and hotels around his shopping malls to maximize the value
of property holdings in the face of similar moves by competitors.
Fifteen of
50 shopping malls now owned by Sy’s SM Prime Holdings are on land large enough
for high-density, mixed-used development, executive vice president Jeffrey Lim,
53, said in an interview in Manila on Monday. Depending on demand, five
so-called townships will be built in two years and about 10 more over five
years, he said.
The
townships will be part SM Prime’s 500-billion-peso ($11 billion) expansion from
now through 2019, Lim said. They will pit the largest Philippine mall developer
against Ayala Land and Megaworld, the biggest builders of mixed-used projects.
Ayala and Megaworld have been building townships for several years,
capitalizing on the rising office-space needs of outsourcing companies, while
higher remittances from Filipinos abroad have fueled home purchases.
“SM Prime
has plenty of resources around its malls, and these will become expensive
parking lots if they don’t do this,” said Richard Laneda, an analyst at COL
Financial Group, who has a buy rating on the company’s stock. “If they don’t do
this, the market will go to the other developers.”
Publicly-held
Philippine builders’ push for townships in and out of Manila boosted their
capital spending to a record 331 billion pesos, according to broker Savills.
Congestion in Metro Manila is driving demand in these micro-districts, it said.
‘On their
toes’
Remittances
climbed 5.8 percent to a record $24.3 billion last year. Money transfers from
Filipinos living and working overseas account for about 10 percent of the
nation’s economy, the World Bank estimates.
“The
live-work-play lifestyle in these townships have resulted into a lot of success
for some major developers,” Michael McCullough, Manila-based managing director
at KMC MAG Group, the local associate of Savills, said in mid-March.
SM Prime
“has to be on their toes to continue to have the upper hand,” said Allan Yu,
first vice president at Manila- based Metropolitan Bank & Trust. He helps
manage about $7.5 billion, including SM
Prime shares. “They have to upgrade their existing assets, not just expand
their portfolio.”
Growing
landbank
SM Prime
has gained 37 percent over the last year, exceeding the 30 percent gain in
Megaworld and the 29 percent advance in Ayala Land. The Philippine Stock
Exchange Index has added 24 percent in that period and the Bloomberg Asia
Pacific Real Estate Index 24 percent.
Net income
will climb 19 percent this year to 21.87 billion pesos, according to median of
13 analyst estimates compiled by Bloomberg.
The
company’s landbank stands at 900 hectares, Lim said. Before Sy pooled his
property assets into SM Prime in 2013, the mall builder’s landbank was about
120 hectares, Lim said.
Sy, who is
90, has an estimated net worth of $13.4 billion, according to the Bloomberg
Billionaires Index. He migrated to the Philippines from China in 1936 and
started selling rice, sardines and soap in his father’s Manila store. He opened
a shoe store in 1948 and eventually built his business empire in the 1980s by
opening malls.
Manila
reclamation
SM Prime
plans to spend 70 billion pesos this year to build malls and homes. After
constructing three to four malls a year, SM Prime has said it plans to open as
many as five in 2015. It plans to start five new residential projects this year
and expand existing developments if there is demand.
As part of
its strategy for 2015, SM Prime aims to sell as many as 14,000 homes valued at
about about 3 million pesos each, Lim said. There is not a supply glut in that
portion of the market, he said. The company gets about a third of revenue from
home sales.
For the
longer term, the company has applied to reclaim 600 hectares of land along
Manila Bay and spend about 100 billion pesos to turn the property into a master
planned integrated and mixed-use community. The development is adjacent to the
group’s Mall of Asia complex and the strip of four integrated casino resorts
that will make up Pagcor Entertainment City.
That plan,
which has won permission from the city governments of Pasay and Paranaque, will
be among the single biggest contiguous developments in Manila if approved by
the nation’s economic planning agency.
“A number
of our malls have excess land, and these are just there untouched,” Lim said.
“Our thrust is to maximize the synergies of integrated development. Building
lifestyle cities will maximize the potential of our properties.”
Bloomberg
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